DEALS OF THE YEAR: Best Bond House

Jan 1, 2013

HSBC

Bonds were once again the focus of Latin America’s
capital markets in 2012, with issuance volumes breaking even
the previous year’s records. By year-end, there
was a growing belief that it would be remembered as the year
emerging market debt finally went mainstream – though
most notable LatAm credits have arguably been conventional for
some time.

Total cross-border bond issuance from the region in 2012
topped $116 billion, reaching $160 billion with local market
deals included, according to Dealogic.

HSBC is one of three investment banks, with Citi and
JPMorgan, that were at the top of the league tables and can
claim a diverse business across geographies, product types,
currencies and markets.

But ultimately HSBC stands out not only for the range of its
deals currencies, markets and clients – including a
presence on most key transactions across the board –
but also for having led several of the year’s most
innovative trades, while also having a formidable pan-regional
presence in LatAm’s local markets.

In the dollar sector, HSBC had a presence on major trades in
the sovereign, quasi-sovereign, and high-grade corporate
segments. The bank led or co-led several LatAm firsts: a
corporate global depositary note (GDN), an offshore renminbi
(Dim Sum) bond, a covered bond, an Australian dollar issue as
well a ground-breaking tier 1 perpetual.

"The debt capital markets platform gained a lot of momentum
in 2012," says Katia Bouazza, HSBC’s co-head of
global capital markets for the Americas. "We brought to the
market a lot of sophisticated deals. HSBC was able to open
markets for issuers so that they could achieve their financing
objectives and have access to an extremely liquid US dollar
debt market."

The bank’s sovereign deals included
Mexico’s $2 billion 32-year benchmark bond, which
allowed the UMS to reach new lows for coupon and yield, as well
as provide a long-end benchmark that can be reopened for two
more years.

HSBC also managed Brazil’s first
real-denominated liability management exercise in several years
and another swap for Colombia. The bank also led deals for all
three LatAm-based supranational banks.

The bank led a 10 and 30-year transaction for
Corporación Nacional del Cobre de Chile (Codelco), its
fifth consecutive transaction for the issuer. The transaction
represented Codelco’s largest-ever issue and the
lowest yield and coupon to date by a non-sovereign Latin
America issuer for both bonds.

Other deals for the region’s high-grade
borrowers include Petrobras in euros and sterling, Vale, and
América Móvil. A $1.15 billion 10 and 30-year
sale from Mexichem drew 17 times demand in the split-rated
space.

"Our global platform allows us to combine local expertise
with global knowledge which gives us the vision to identify
opportunities others might not and drive product innovation,"
says Gerardo Mato, chief executive of global banking for the
Americas.

HSBC worked on some of the biggest high-yield trades,
including those for OGX and Colombia Telecomunicaciones.
However, this is one area where it has done less business than
the other banks at the top of the overall league tables and is
perhaps the only hole in its armour.

Mato says the bank has started to build its client base to
cater better for frequent issuers and also accommodate a
growing number of high-yield names.

HSBC most stood out in innovative trades in both the dollar
market and in diverse currencies. The bank was among those
chosen for Pemex’s GDN offering, the first
corporate transaction that emulates terms of a particular
Mexican local currency-denominated bond and trades, settles and
pays in US dollars. It was the second Latin American GDN issuer
after Peru, in a deal that created a new funding alternative
for the region’s corporate borrowers.

Panama’s Global Bank promoted HSBC from
co-manager to joint bookrunner in its second – and
successful – attempt to bring Latin
America’s first covered bond to market in
September. The $200 million 2017 issue generated $500 million
in orders from 70 accounts.

Other ground broken included the $1 billion junior
subordinated tier 1 perpetual for Banco do Brasil, the
region’s first bank bond designed to be Basel III
compliant, offering several flexibilities within the structure
to allow for changes once Brazil’s government
defines its Basel III rules.

A 1 billion yuan ($120 billion) 2015 bond from
América Móvil was LatAm’s first Dim
Sum issuance. That trade and Pemex’s A$150 million
($156 million) issue opened new markets that regional borrowers
had long wanted to tap.

Perhaps only Citi and Santander can boast a domestic debt
market reach matching that of HSBC. In a September reopening of
the Mexican road securitization market, Red de Carreteras de
Occidente’s (RCO) 8.12 billion peso ($624 million)
transaction was the first deal of its type in nearly a year.
The 930 million real ($508 million) Driver Brasil One Fundo de
Investimento em Direitos Creditórios (FIDC) transaction
in April broke new ground for ABS deals in Brazil, with
features including the first pass-through amortization
structure.

"We have had a busy last quarter and a strong pipeline,"
Bouazza says. "We will continue to see an issuance trend in
dollars and local currencies and expect the low rate
environment to continue for now. In terms of spreads, there has
been a bit of a pushback from investors given that yields are
reaching very low levels, but appetite remains solid and deals
have been well received." LF

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